Q: My sole proprietorship ran a loss this year, and even cancelled out all my other income. What do I do with the remaining loss?
Jack
A: What you have is a "net operating loss" (NOL). These are dealt with in Publication 536, Net Operating Losses. The general definition of an NOL is the situtation where business losses exceed gross income.
NOLs can be carried back for two years (three years for casualty losses, losses in a disaster area, and sole proprietorships earning less than $5 million annually), and carried forward for twenty years. When the NOL is applied to one of these years, it functions like an extra deduction against income that year.
There are special rules for GO Zone areas (Katrina). The carryback can be waived in favor of a carryforward. If there is a change in marital status, that must be taken into account.
Claiming an NOL is done (for the carryback) using Form 1045 (or Form 1040X if the claim is done year-by-year). Going forward, NOLs are claimed as negative income under "other income" on the 1040.
My question is.. Is a NOL the same thing has having a internet business that has not started earning yet? I started my internet business and worked "learned" the business and buying up everything I needed for my home business and I am planning on filing with my wife has a partnership "she works another job" 30,000 a year. Now can I file with my wife has a partnership in our internet business and show all the things I bought for the business has a loss "new computer, printer,software etc." for the year even if I made no money?
Posted by: Jerry Martin | 2008.03.06 at 06:22 AM